New Law Specifies Physicians' Non-Compete Agreement Requirements

On June 21, Governor Phil Bredesen signed House Bill 240/Senate Bill 1688, which was the General Assembly’s response to a 2005 case in which the Tennessee Supreme Court declined to enforce a non-compete provision in an employment contract between a physician and a clinic. In Murfreesboro Medical Clinic, P.A. v. Udom, the state’s highest court held that, except for restrictions specifically provided for by Tennessee’s corporate practice of medicine statute, “covenants not to compete are unenforceable against physicians.”

The new law defines the non-compete restrictions an employer may place on its employed or contracted health care providers. To be considered reasonable, the restriction must be in writing and may not last longer than two years. The new law also includes specific provisions for geographically restricting competition of former employees. According to another provision, non-compete restrictions will not be binding on a health care provider who has been employed by, or under contract with, the employing or contracting entity for at least six years.

The statute applies to podiatrists, chiropractors, dentists, optometrists, psychologists and those licensed in the practice of medicine and surgery.  It does not, however, apply to radiologists and providers who specialize in the practice of emergency medicine. The new legislation takes effect on January 1, 2008.  For a copy of the new law, visit http://tennessee.gov/sos/acts/105/pub/pc0487.pdf.

Note: This article was published in the August 2007 issue of the Tennessee eAuthority.